Hood v. Ascent Medical Corporation et al

Filing 69

OPINION: For the foregoing reasons, the complaint is dismissed without prejudice for lack of personal jurisdiction and the default judgment is vacated. IT IS SO ORDERED. (Signed by Judge Robert W. Sweet on 6/20/2016) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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CIARAN HOOD,
Plaintiff,
13 Civ. 628

(RWS)

- against OPINION
ASCENT MEDICAL CORPORATION; SALALAH
MEDICAL DEVICE MANUFACTURING COMPANY,
SAOC; ASCENT MEDICAL TECHNOLOGY FUND II,
L.P.; SALALAH MEDICAL SUPPLIES
MANUFACTURING COMPANY, L.L.C.; and
ASCENT PRIVATE EQUITY II, L.L.C.,
Defendants.

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A P P E A RA N C E S:

Attorneys for the Plaintiff
DORNAN & ASSOCIATES
45-58 Vernon Blvd.
Long Island City, NY 11101
By:
Eamonn Seamus Dornan, Esq.

MCCABE & ASSOCIATES
10 Rockefeller Plaza, Suite 900
New York, NY 10020
By:
Gerard Greogry McCabe, Esq.

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USDCSDNY
DOCUNIENT
ELECTRONICALLY FILED 1 .
DOC#;
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DATE FILED:
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6::20-J

Sweet, D . J .

The Court referred this action to the Magistrate , the
Honorab l e Debra Freeman , for a damages inqu est on April 10, 2015
after granting a defau l t

judgment on April 8, 2015. The

Magistrate appropriately considered the question of jurisdiction
over the defendants (Ascent Medical Corporation or " AMC " or
Salalah Medical Device Manufacturing Company or " SMDM " or
" Defendan ts") as well as determining damages and filed the
Report and Recommendation ("R&R") on March 3 , 2016 , recommending
that the default judgment be vacated and alternatively
calculating damages in the amount of $771 , 909 . 80 p lu s interest.
The Plaintiff , Ciaran Hood (the "P l aintiff " or "Hood") filed his
Object ion to the Magistrate Judge ' s R&R on April 4, 20 16.

As set forth be l ow , the Recommendation of the
Magistrate is approved and the default judgment vacated , and the
action dismissed for lack of jurisdiction without prejudice .

Prior Proceedings

Hood commenced this action against Defendants on
January 29 , 2013 . On March 13 , 2015 , Hood fi l ed a ·moti on for
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default judgment. This Court entered default judgment against
the Defendants on April 8, 2015 as they failed to appear and
referred the case to Magistrate Judge Freeman on April 10, 2015
for a damages inquest.

On March 3, 2016 Magistrate Judge Freeman issued the
R&R recommending that the Court vacate the default judgment and
dismiss the action for lack of personal jurisdiction. In the
alternative, Magistrate Judge Freeman completed the damages
inquest. Hood objected to the R&R on April 4, 2016, at which
point the motion was marked fully submitted.

Applicable Standard

The District Court adopts a Magistrate Judge's Report
and Recommendation when there is no clear error on the face of
the record. See Nelson v. Smith,

618 F.Supp. 1186, 1189

(S.D.N.Y. 1985); Silva v. Peninsula Hotel,

509 F.Supp.2d 364,

365-366 (S.D.N.Y. 2007). The Court is required to make a de novo
determination about any aspects of the R&R to which objections
are made. United States v. Male Juvenile,

121 F.3d 34, 38

(2d

Cir. 1997). The court may then accept, reject, or modify in
whole or in part, recommendations of the Magistrate Judge. See
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Nelson , 618 F . Supp . at 1189 .

The Court Adopts the R&R in Full

The Plaintiff objected to the Magistrate ' s R&R for two
primary reasons:

(1) the Magistrate offered no authority for

considering personal jurisdiction sua sponte; and (2) even if
such authority existed , the Magistrate ' s analysis was incorrect
because there is personal jurisdiction over the Defendants. For
the reasons that follow,

the Magistrate d i d have authority to

consider personal jurisdiction sua sponte and that there is no
personal jurisdiction over the Defendants in New York, as
currently pled.

Plaintiff argues that the proper procedure to
cha l lenge personal jur i sdiction i s through a collateral
proceeding after a default judgment is entered . While Plaintiff
is correct that a collateral proceed i ng is an opportunity for
Defendants to challenge personal jurisdiction, this Court may
stil l find sua sponte that the Court does not have jurisdiction
over the foreign Defendants. In Sinoying Logistitcs Pte Ltd . v.

Yi Da Xin Trading Corp, the Second Circuit found that "when a
defendant declines to appear,

. before a court grants a
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motion for default judgment, it may first assure itself that it
has personal jurisdiction over the defendant." 619 F.3d 207 , 213
(2d Cir . 2010) ; see also, City of New York v. Mickalis Pawn
Shop, LLC,

645 F.3d 114, 133 (2d Cir . 20 11)

(quoting part of the

same passage from Sinoying). While the Second Circuit has noted
that it is an open question "whether a district court must
investigate its personal jurisdiction over a defendant before
entering a default judgment," the Court certainly may
investigate jurisdiction sua sponte . Mickalis,

645 F . 3d at 133

(internal quotation omitted and emphasis in original) .

The Magistrate appropriately found that there was no
general jurisdiction in this case because New York was not the
Defendants' state of incorporation nor the location of its
principal place of business.

(R&R at 17-22.) In order to find

general jurisdiction, the Magistrate correctly found that the
foreign corporation must satisfy both the state statute for
general jurisdiction in the forum state (here New York) as well
as the Due Process Cl ause of the 14th Amendment. The traditional
test for Due Process had been whether the defendant 's contacts
with the forum state are "continuous and systematic."
International Shoe Co. v. Washington,

326 U.S. 310 , 316 (1945).

The Supreme Court clarified this standard in Goodyear , finding

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that there would only be general jurisdiction if a corporation's
"affiliations with the State are so 'continuous and systematic'
as to render [it] essential l y at home in the forum State."
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S.

915 ,

919 (2011).

Plaintiff objects that the Magistrate did not find
that two entities , AMC and SMDM were indistinguishable and
should be treated as alter egos . However, the R&R assumes that
these entities are alter egos for the purpose of conducting the
personal jurisdiction analysis . The Magistrate determined that
the Court did not have general jurisdiction over Defendants
because AMC (the alleged alter ego of SMDM) was incorporated in
Delaware and its principa l place of bus iness was in Minnesota.
The office in Minneapolis is described as AMC's "US Head
Office ," it i s where the previous CEO worked , and is where the
Vice President of Sales and Marketing was located. The
Magistrate correctly found that alleg in g AMC had a place of
business in New York is not equivalent to alleging New York was
the company's principal place of business, which is likely
Minnesota .

Instead, the Plaintiff argues that because the
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contract contained a cho i ce of law clause favoring New York law,
this clause shou ld be read to also be sufficient for a cho i ce of
forum c l ause . While Plaintiff in his ob j ection correct l y notes
that a choice of law clause may be a "s ig nifi cant factor" in
determining whether the defendant conducted business in the
forum , i t is not alone dispositive .

(Objection

at~

53 .) Despite

Plaintiff's argument to the contrary , the choice of law clause
combined wi th maintaining an office in New York , attending one
trade show i n New York , and so l iciting an unknown number o f
sales in New York are insufficient contacts to establish the due
process requ i red to make AMC " essentially at home in the forum
State ." (See , R&R at 21 ; Goodyear , 564 U. S. at 919 . )

Second , the Magistrate fo und that there was no
specific jurisdiction over the Defendants because the
allegat i ons in the complaint do not arise from Defendants'
limi ted contacts wit h the forum state .

Specific jurisdiction is met under New York ' s long-arm
statute , C . P .L. R .

§

302(a) ( 1 ) when the defendant has transacted

business with i n the state and the c l aim arises from that
business activity . Sole Resort, S .A. de C.V. v. Allure Resorts
Mgmt., LLC, 450 F.3d 100, 103 (2d Cir . 2006) . In this case , the

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Defendants did conduct business in New York and purposefully
availed themselves of the benefits of doing business in New
York. However, the Magistrate correctly found that none of
Plaintiff's claims arise out of those contacts because his
employment contract was neither negotiated nor substantially
performed in New York . Pl aintiff's claim that the choice of law
provision establishes jurisdiction under§ 302(a) (1) does not
establish the required nexus between the New York contacts and
the causes of action at issue in this case . As Plaintiff notes
in his objection , "Although the choice of law clause contained
in the parties ' distributor sales agreement is a relevant factor
in determining whether defendant transacted business in new
York, absent more, it is insufficient to warrant a finding of
long-arm jurisdiction pursuant to CPLR 302 (a) (1) " Goulds Pumps,
Inc. v. Mazander Engineered Equipment Co ., 631 N. Y.S . 2d 264, 217
A . D. 2d 960 (4th Dep't 1995). Here, any other contacts are so
minimal that they fall short of the bar for personal
jurisdiction over these foreign Defendants required by C.P . L . R.
§ 302 (a) (1) .

The Magistrate also appropriately found that there was
no specific jurisdiction under C.P . L.R. § 302(a) (2) or§
302(a) (3) . These sections require that the tortious act be
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committed in the forum state or that the plaintiff suffered the
injury in the forum state, respectively. Plaintiff claims that
there is specific jurisdiction under C .P.L.R. § 302(a) (2) and§
302(a) (3) because AMC is the alter-ego of SMDM and the
employment agreement contained a New York choice of law
provision . However, neither theory compensates for the
insufficiency in Plaintiff ' s submissions , which never adequately
a ll eged that a tortious act or injury occurred in New York . To
combat this deficiency, Plaintiff argues for the first time in
his objections that the tortious interference and defamation
torts occurred in New York , including that certain defamatory
statements were made in New York . However, there is no such
allegation in the complaint nor in any previous submission .
"Generally, courts do not consider such new arguments or new
evidence raised in objections to a magistrate judge's report and
recommendation that could have been raised before the magistrate
but were not and the Court declines to do so. " Chalasani v .
Daines , No. 10-CV-1978, 2011 W 4465408, at *1 n . 3 (E.D.N.Y.
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Sept . 26 , 2011). Previous submissions merely contained
conclusory allegations that torts were committed in New York,
which without more , cannot be the basis for specific personal
jurisdiction under C. P.L . R. § 30 2 (a) (2) or § 302 (a) (3).

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•

For the foregoing reasons, the complaint is dismissed
without prejudice for lack of personal jurisdiction and the
default judgment is vacated.

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It is so ordered .

New York, NY
June

1-€J ,

2016

ROBERT W. SWEET
U.S.D . J.

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